Shares of Spirit Airlines plunged nearly 50% Tuesday after a federal judge blocked JetBlue Airways' (NASDAQ:JBLU) plan to purchase the budget airline for $3.8 billion.
The ruling is a win for the US Justice Department, which sued to block the merger on the grounds that it would increase fares by reducing competition in the discount airline market.
The deal would have created the fifth-largest airline in the US.
“JetBlue plans to convert Spirit’s planes to the JetBlue layout and charge JetBlue’s higher average fares to its customers,” US District Court Judge William Young wrote in his decision. “The elimination of Spirit would harm cost-conscious travelers who rely on Spirit’s low fares.”
The DOJ suit claimed that JetBlue’s planned acquisition would eliminate “about half of all ultra-low-cost airline seats in the industry.”
“Today’s ruling is a victory for tens of millions of travelers who would have faced higher fares and fewer choices had the proposed merger between JetBlue and Spirit been allowed to move forward,” Attorney General Merrick Garland said in a statement.
“The Justice Department will continue to vigorously enforce the nation’s antitrust laws to protect American consumers.”
JetBlue shares gained close to 5% Tuesday.